Let’s talk about what the experts say on how much you need to retire comfortably at 55 so that you can decide which philosophy you agree with and you can figure out how much you are actually going to need to retire. Plus I’ll be sharing my own philosophy on how much I think you’ll need to retire. Let’s first talk about Susie Orman she is pretty popular in the finance world.
She’s actually one of the experts that I went to when I was first starting to learn to invest in the stock market. I read one of her books Women and Money owning the power to control your Destiny which was pretty good. She had it laid out very simply in six different steps so you could do one item each month. But let’s talk about her philosophy. She covers five main things that she wants you to do so that you do not go broke in retirement.
The first thing she wants you to do is to take a hard look at your finances if you haven’t already. She says to buckle down and run through your budget with a fine-toothed comb. Compare what you’re spending to what you’re saving, trim the fat where you can, and cut back on unnecessary spending to allocate more money to your retirement savings. And I think that is the beginning step. You have to see where you are with your finances and one way that I like to do this is by using a free app. It’s called personal capital.
You can hook all of your financial accounts to Personal Capital so you can see your full financial picture in one place, including your net worth and everything that you have in your retirement account. If this is something you’d be interested in, I will leave my referral link below. You can click on that and set up a free account with Personal Capital but make sure that you are taking a look at your finances so you know how much is coming in and how much is going out and where it’s going out to. And then one of the things that she mentions with that if you are going to stay in your home when you retire, then she wants you to pay that off as soon as possible.
And then the second thing she talks about is downsizing your home. She says you may have plenty of sentimental reasons to want to stay in your current home, but if it is more space than you need. You can make money off of it, you may want to consider selling now because of the profits that you make from selling, you can invest that money and then live off of that during retirement. And then the third thing she talks about is beefing up your emergency fund. And the amount that she wants you to have in an emergency fund is a lot more than what I would recommend. And a lot of experts recommend having three to six months’ worth of your expenses in an emergency fund.
But Susie Orman recommends that you have two to three years’ worth of your expenses in your emergency fund. And her reasoning is that if the market ever takes a downturn, you’re not going to want to be withdrawing from your retirement accounts until it bounces back. With a substantial emergency fund, you’ll be able to get by until it’s once again safe to take out funds from your retirement account. For me, I feel like that is pretty high to have that just sitting in a savings account because that money could be working for you. You could be investing that money and making it grow over time.
But there is a risk the market could go down. So you most likely would be taking money out of your investments. But to me, it seems like it would be worth it because it would be growing so much over time that even if you were to take it out during a downturn, you wouldn’t lose more than you had gained. But that is just my opinion. The next thing that Susie talks about is investing in a Roth IRA instead of just a traditional IRA because she wants you to be able to take that money out of your account without paying any taxes.
With a Roth IRA, your investments will grow tax-free over time. And if you have more questions about a Roth versus a traditional IRA. I’ll leave the link above and below. And then she says, make sure and update your investment portfolio over time. As you’re getting closer to retirement age, you probably don’t want to have a significant amount invested in stocks.
You can probably move some of that money over to bonds. And she recommends investing in stocks or ETS exchange-traded funds.
So even if there is a downturn in the market, you will still receive income from the dividends. And then here’s a quote from Suzie Orman. She says, the biggest mistake you will ever make in your financial life are the mistakes you don’t even know that you are making. So she emphasizes learning about investing, learning how to take care of your money so that you aren’t making large mistakes. And then as far as how much you should have invested in order to retire, she’s actually quoted as saying you should have $5 million invested or even $10 million because of taxes.
That’s a pretty high amount. But yet that is what some people may need, but people can also live off a lot less. It depends on your own circumstances. And she doesn’t agree with the fire movement. She said that she hates the fire movement.
Financial Independence retire early Susie says one of the greatest investments young people can make in themselves is to start putting money away in their 20s. When you leave the workforce in your prime and shift from saving to spending, you miss out on the compound interest of all the money you would have saved. A powerful multiplier. And Susie mentions that the new retirement age is actually 70 because she thinks retiring early is unrealistic, especially because of rising health care costs, which people don’t plan for. If you need to raise funds for a big unanticipated medical or other expense, it’s hard to re-enter the workforce if your skills and contacts are out of date.
So according to Susie, we should be working longer and investing more of our money, building up that retirement fund so that we don’t run out of money in retirement and we can take care of all of our costs, including our health care costs. Comment below and tell me what you think of Susie Ormond’s retirement philosophy. The second expert we are going to talk about today is Robert Kiyosaki. He wrote the book Rich Dad, Poor dad, which I have read, and I thought it was super helpful. So I would definitely recommend reading that if you haven’t yet.
I’ll leave a link to that below in the description. But his philosophy is more about buying assets and then buying liabilities. He wants you to invest in things that are going to make you money, and then once you have those assets that are making you money, then you can buy the things that aren’t going to be making you money—the liabilities. And Robert Kiyosaki says the difference between Kim and I, his wife and him, and the people struggling at retirement is that those people play by the old rules of money, relying on savings and 401K for retirement.
The problem is that people are living longer, health care is more expensive, and those savings are not enough yet. They have no other way to have money come in besides going back to work and making cuts in their expenses. And I do like his philosophy of investing in assets first because those are the things that are going to make your money grow. That’s what I’ve been able to do. I’ve invested in real estate properties.
I’ll leave a link above and below. But by investing in those assets first, they are creating the money for you. You can take the cash flow from your rental property and then put that toward a car payment every month instead of just buying the car first and then taking money from your paycheck and putting that toward the car payment. And the third expert we are going to talk about is Dave Ramsay, he gives us four steps to plan for your retirement. The first step is to set your retirement goals. What is your retirement dream? Do you want to ride around in the country in an RV? Buy a house on a lake and go fishing every day? Spend a bunch of time with your grandkids? Figure out what it is you want to be doing in retirement, and what your dream life would look like.
And this way, it’ll give you a starting point for retirement planning and help you answer some important questions, like how much money you’ll need by the time you retire and how close you are to making your dream retirement a reality. The second step that he gives is to save 15% of your income. And by save, he means invest 15% of your gross income. And he recommends investing in good growth stock mutual funds through a tax-advantaged retirement savings plan like a Roth IRA, because, like Susie, he knows that that money will grow tax-free in a Roth IRA. So when you take that money out, you are not paying taxes on it.
And he says that your goal should be to consistently invest for retirement as you focus on other financial obligations. And Dave Ramsey gives an example of a couple with a household income of $56,000 who could have around $1.1 million for retirement if they invest 15% of their income for 25 years, in 30 years, they could have $1.9 million. And that’s assuming they never got another raise during their working lifetime, which is highly unlikely. And Dave Ramsey also says, ideally, you should be able to live off the growth of your retirement savings rather than dipping into your nest egg. So he wants you living off that interest, that growth that is happening in your investment account.
And then step three is to invest for the long term. And this one is really important. We need to keep that long-term mindset so that when the stock market gets crazy and it starts to dip down or even crash, that we aren’t selling all of our investments. Dave Francis says to build wealth and invest with success, you need patience. Lots and lots of patience.
Slow and steady wins the race every time. There are no shortcuts. And then step four in his retirement planning is to work with a financial adviser or an investment professional. Dave Ramsay says investing isn’t a solo activity. You need someone who can help you create a retirement investment plan that fits your life and your goals.
And that means working with a financial adviser or investment professional you can actually trust. Retirement planning is too important to figure out on your own. And I have personally found that as long as you are educating yourself and understanding what you are investing in, then you can invest on your own.
